Exclusive: Amazon Programs mega-warehouse for Mexico growth spurt

Amazon is a relative newcomer to Mexico; it expanded to sales of products a couple of years back and opened its Kindle e-books website to clients in 2013. Nevertheless, it is growing much faster than rivals like Wal-Mart Stores Inc, and is currently the nation’s third-largest online retailer. Amazon posted $253 million in sales in Mexico last year, more than double the year before, according to market research firm Euromonitor International.
“We need to find a middle point that doesn’t damage our economies with intense liberalization,” Mexico Economy Minister Ildefonso Guajardo said in the end of NAFTA talks in Mexico City early this month. The next round is scheduled for Ottawa.

At 1 million square feet, the new facility would have the ability to distribute bulky products like furniture, in addition to small items like books and microwaves, a set-up Amazon uses in other foreign countries, said Marc Wulfraat, president of the logistics consultancy firm MWPVL International.
Amazon spokesman Julio Gil declined to comment on plans for a warehouse in Mexico. He said the company unit is planning to expand its product offerings, offer deliveries and make the process as smooth and secure as possible to inspire consumer confidence.

That reluctance may fade as Mexico’s middle- and upper-class millennials gain purchasing power.

“It’s not like other web pages when you order things, and perhaps they do not arrive. It’s very safe,” he said.
All are currently fighting for loyalty from consumers unaccustomed to clickable shopping and wary of credit card and mail fraud.
“Much of the reticence of Mexican shoppers to make purchases on the internet is doubt,” said Carlos Hermosillo Bernal, an analyst in Actinver. “Will I get the product? Is it what? What guarantee do I have?”

Sharing a nearly long border with the United States, Mexico would seem a logical spot for Amazon to expand. But duplicating the business’s U.S.-style success could prove harder.
The new warehouse is slated to be constructed in the Tepotzotlan municipality about 25 miles (40 kilometers) north of the Mexican capital, according to four Mexico City property professionals knowledgeable about the plans. Expected to be finished next year, Amazon’s distribution space would be tripled by the centre in Mexico, home to approximately 120 million potential customers.

Amazon’s Mexico push comes to revamp if the United States persuades Mexico to raise a limit on the value of online purchases that may be imported duty-free the North American Free Trade Agreement, which could benefit the Seattle-based retailer.
Mexican negotiators are treading cautiously amid push-back from Mexican industries such as textiles and footwear.
The proposal, which is backed by U.S. trade agents, would push the duty-free limit on imports to about $800 from thresholds of $50 in Mexico and C$20 ($16.5) in Canada. That would give consumers in these countries an incentive to purchase big-ticket products online from america, an idea that President Donald Trump has championed in his “Buy American” agenda.

Published at Wed, 13 Sep 2017 22:04:51 +0000
“If they largely failed in China, why strive in Mexico, Brazil or India? The solution is they haven’t failed yet in those areas, and they may be able to right the boat,” he said.

Shopping comprises nearly 3 percent of all retail sales in Mexico compared with more than 10 percent in america. Some Mexican shoppers are wary of online fraud and several don’t have credit cards.

The new facility has been built by industrial programmer Fibra Prologis, according to sources knowledgeable about the plans. The Mexico-based real estate investment trust owns 34.2 million square feet (3.2 million sq m) of logistics and manufacturing space across Mexico. Prologis declined interview requests.
Global trade analyst Claude Barfield of the American Enterprise Institute anticipates that even there is a compromise not likely to dash Amazon’s plans for Mexico.

TWEAKING TRADE RULES

However, Mexico’s vast wealth disparity and cultural differences lead some analysts to doubt whether Amazon can replicate a U.S. purchasing concept. After struggling to understand the local markets, Amazon backed off from its investments in China, for example, said managing partner at Loup Ventures, Gene Munster.

MEXICO CITY (Reuters) – Amazon.com Inc

20, Mexico City-based school student Daniel Arturo Munoz Castro, said he has bought smartphone accessories, board games and t-shirts on Amazon’s program. He appreciates the variety of use, even though his dad thought it may be a scam.
Is currently preparing to open a 1 million square-foot warehouse near Mexico City, sources knowledgeable about the project said, part of an effort to boost its presence in the nascent industry of Mexico.

“Amazon is very fluid with its logistics,” he said. “As long as that border is reasonably open, Amazon is extremely agnostic.”

The new warehouse will be built approximately 7 miles (11 kilometers) from the existing facilities. All are situated along the so-called “NAFTA” highway, an industrial belt that runs through Mexico’s factory areas into the U.S. border.

“I can not imagine this would be a deal-breaker,” he said.
The location could serve for goods moving north to the United States, added Saunders from GlobalData.

“Amazon is not afraid to plow into a new market in a really major way, have a major hit, but say, 10 years down the line, this will be big and rewarding,” said Neil Saunders, managing director in the GlobalData Retail research firm.

“We’re trying to eliminate any rust,” Gil said.
Some analysts believe Amazon is willing to take the risk as it races to bulk up in overseas markets to compete with fast-moving global competitors like China’s Alibaba Group Holding Ltd..

MEXICAN RETICENCE ONLINE

If about 85 percent of this space is used for smaller products — average of a U.S. warehouse setup — Amazon would have the ability to save 15 million products and make up to 1 million deliveries a day nationwide. It would employ 2,000 to 3,000 people to handle the shipments, Wulfraat said.
Amazon may be poised to reap rewards if Canada, Mexico and the United States raise the value of online purchases that may be imported duty-free as part of a North American Free Trade Agreement.

Amazon’s global operations stretch across 14 countries including Latin America nations, Mexico and Brazil.
Amazon currently operates two distribution centers in Mexico totaling over 500,000 square feet (46,452 sq m), Gil said. Both are in the state of Mexico in Cuautitlan Izcalli, adjacent to the district of Mexico City, whose metro area is home .
Amazon’s 2016 Mexico sales fell behind the market leader, the MercadoLibre Inc of Argentina, with $435 million in earnings, according to Euromonitor. Still Amazon edged out No. 4 Wal-Mart and was neck-and-neck with third-place Linio, a branch of Berlin-based Rocket Internet .